Natural Gas

Its Role And Potential In Economic Development

Walter Vergara

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429713996
• Edition: 1
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

This book is concerned with the multifaceted character of natural gas and the potential for its utilization as a powerful tool for future development. It deals with the specifics of gas uses in a number of sectors chosen for their relevance in the development of industrial economies.

1
The Emergence of Natural Gas

Nelson E. Hay

Natural gas is an abundant resource with broad worldwide distribution. Yet, given its inherent economic and environmental advantages, it may be considered underutilized. This situation is now changing dramatically. Natural gas is emerging as a "fuel and raw material of choice" for coming decades, with important implications from a development perspective.

Certainly the natural gas resource base is now recognized to be large. The economically recoverable natural gas resource of 10,869 quadrillion Btu (quads) (11,471 exajoules-EJ) represents 175 years of supply at today's consumption rate.¹ The International Gas Union (IGU) projects that by 2020, 74-90 years of economically recoverable gas resources at 2020 consumption rates will remain, even if maximum potential gas demand rates are attained.² North America and Western Europe would be the only areas where economically recoverable natural gas resources of less than 50 years would remain in 2020 at maximum demand rates.³ The total in-place worldwide natural gas resource base, including sources not yet economically producible with today's technology, is several orders of magnitude greater.⁴ Clearly, there are sufficient gas resources in place worldwide to satisfy any plausible requirements through the twenty-first century.

These resources have not gone totally unnoticed. World gas consumption increased by 73.8 percent between 1970 and 1987, an average increase of 3.3 percent annually. Excluding the United States, where natural gas use decreased by 20.6 percent over the period, natural gas consumption in the rest of the world rose by 220 percent.⁵ This broad growth in natural gas use was based on plentiful supply, moderate costs, environmental benefits and national programs to reduce dependence on oil.

In spite of this increased natural gas consumption, the natural gas resource base remains far less utilized than the oil resource base. In every major oil and gas producing country the reserves to production ratio (R/P) is higher for gas than for oil. Worldwide the R/P ratio was 58.3/1 for gas and 41.5/1 for oil in 1987.⁵ Why is this so?

There are several answers. Initially, natural gas production was an unwanted byproduct of oil production. We really didn't realize how much of it there was (and is) from a resource perspective. With time and technological development (e.g. deep drilling, offshore drilling) we are coming to recognize that the natural gas resource is large, as we continue to find surprising amounts of it. Major oil and gas producing companies of the past are now saying that they will be gas and oil producers in the future -- gas will come to have the greater importance.

Even in those instances where we knew we had a lot of gas, development of a transportation infrastructure faced significant hurdles. From an international trade perspective, an economically viable seaborne means of moving gas did not exist until development of modern liquefied natural gas (LNG) technology. Significant pipeline and local distribution infrastructures developed in the major industrialized nations, but in much of the rest of the world, particularly the third world, the conventional wisdom was (and has continued to be) that economics favored the development of an electricity infrastructure in lieu of a natural gas infrastructure. In other words, it has been believed that many nations cannot afford to develop both natural gas and electricity infrastructures, but must choose one. Because everyone needs electricity for lighting, communications, etc., the obvious choice has been electricity, although electricity is clearly a less efficient and more polluting use of resources in many applications.

Today, the basic underpinning of this "electricity only" theory has collapsed as a result of developments in electricity generation technology which eliminate the need for large, central station electricity generating plants. The "electricity only" theory depended upon the fact that electricity generation was highly capital intensive and buildable only in large increments. Available technologies required large, central station generating plants in order to optimize plant economics. The necessity to optimize plant economics, and the necessity of building these very large, very expensive plants in turn necessitated maximizing electricity demand to pay for the plant.

As discussed in Chapters 3 and 5, the successful commercialization of natural gas combined cycle and cogeneration turbine technologies have revolutionized electricity economics. With these technologies, and others which are emerging, dispersed electricity generating capacity can be added in smaller, more flexible increments (e.g., under 100 MW), in a fraction of the time, and at one third to one fifth the capital cost -- resulting in lower cost electricity and dramatically reduced environmental impact (see Chapter 5). Thus, the need to support a one-time, massive investment in central station electricity generating capacity no longer exists where natural gas is available.

Once natural gas production and pipeline capacity is being installed to service electricity generation (or other large-scale uses such as ammonia or methanol production), the next logical step is to hook up other users along the pipeline to natural gas as well. Initially these might be large industrial and commercial users and fleets of vehicles (as discussed in Chapter 5), but the establishment of residential and commercial grids would logically follow.

This brings us to another key element of the "electricity only" development theory -- namely, that it is not economically, technically or even politically practical to install natural gas main and to retrofit homes and other buildings to use gas in existing urban areas and communities. With the advent of plastic and flexible piping, this notion is now being disproven in countries as diverse as Egypt, Barbados and Brazil.

The past decade has seen an unprecedented outpouring of new natural gas technology. With today's natural gas end-use technology (and more so with the coming generation, e.g. fuel cells; self-fueling heating and cooling; advanced, factory-built vehicles) direct use of natural gas or cogeneration with natural gas is the most efficient, least polluting means of providing energy. Where the high cost of electricity is a serious problem, use of gas to generate the electricity can often cut the cost by as much as half; and direct use of gas can often cut energy costs by two-thirds. Where the high cost of emissions controls are an obstacle to their use, few controls are required with natural gas.

Changing perceptions with regard to environmental protection, as discussed in Chapter 3, are the final blow to the "electricity only" theory. Until recently it was widely believed that developing nations couldn't afford environmental protection. This argument weakened at the international institution level with increasing recognition of the trans-national and even worldwide nature of problems such as acid rain and climate change. Now, increasingly, protecting natural resources is seen at the developing country level as a necessary survival strategy rather than a luxury, a means of sustaining progress rather than constraining it. Pollution control can be very expensive. That natural gas offers a low cost means of minimizing pollution while also choosing a least-cost energy strategy is a benefit whose time has come.

Overview of Natural Gas Resources

The terminology used in reporting gas resources can be quite confusing. Generally, there are three basic levels: proved reserves, economically recoverable resources; and in-place or total resources. Gas in the first category already has been discovered, and is considered producible under current economic and operating conditions. Gas in the second category is believed to exist and is estimated to be producible under economic and operating conditions which are presently considered likely to exist in the foreseeable future. Gas in the third category is the total resource believed to exist in all deposits, of which some portion (depending on technology and economics) could be produced. With time and technological development more and more of this gas resource will become economically recoverable.⁴

Cutting across die categories just defined above, gas resources are often also broken out into conventional and unconventional or non-conventional. The term "non-conventional," for the purposes of this chapter, refers to resources such as tight sands, Devonian shale, coal seam methane and other gas resources requiring enhanced gas recovery techniques. The existence of these sources is well documented, and estimates are based on numerous known occurrences worldwide.

There are, however, two potential sources of gas which differ from the other non-conventional sources because of their intangible nature and the vast quantities of energy which could result if theories supporting their existence are proven to be correct. These are methane from gas-hydrates and abiogenetic methane or deep-earth gas. While the existence of gas-hydrates is acknowledged, very little is known about this potential gas source. The theories surrounding deep-earth gas are at present unproven. As more knowledge of these sources is gained, there is the potential for extremely large quantities of gas being made available worldwide.

A more detailed discussion of natural gas resources and production technology appears in Appendixes A and B. The key point to be made here is that when all gas categories are considered, and compared to current consumption, there are clearly sufficient gas resources in place worldwide to satisfy any reasonable demand requirements through the twenty-first century and beyond (see Table 1.1). Further, it is widely recognized that many known gas reservoirs are currently untapped, often in nations which rely heavily upon imported petroleum or refined petroleum products.

Table 1.1. World Gas Consumption vs. Resources

Comparison of Resource Definitions for Various Fuels

The confusion inherent in resource terminology is not limited to natural gas. It is worth noting that in 1987 the Institute of Energy Resource Studies at the Colorado School of Mines issued an important study concerning resource definitions of selected fuels.⁶ The Colorado School of Mines study points out the major differences in the way coal and natural gas reserves and resources are calculated and defined. It is apparent that the existing systems sure inconsistent.

In particular, the phrase "reserve base" includes subeconomic resources when used with coal. As discussed above, the term proved reserves is most commonly applied for those natural gas resources which have been confirmed to exist (as a result of drilling) and are currently producible under contemporary technical and economic conditions.

In the jargon of coal only the term "identified, economic coal reserves," would be comparable. The usual references to the "coal reserve base" describe a quantity of coal that is thought to be in place, but it does not address the amount of that coal that can be economically recovered. Thus, estimates of "the coal reserve base" are more like the gas "in-place" than it is like gas "proved reserves" (which is limited to economically recoverable reserves). As a result, for long range energy planning issues, there is no certainty regarding the true relative sizes of the resource of natural gas as compared with coal.

Table 1.2. International Gas Union (IGU) World Natural Gas Reserves as of January 1, 1986¹

Regional Distribution of Recoverable Gas Resources

As shown in Table 1.2, significant, recoverable gas resources are found in all regions of the world. While the United States, Eastern Europe (including the USSR) and the Middle East account for 79 percent of reported reserves, these figures tend to be a function of die intensity with which a given region has been explored for ga...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Preface
• 1 The Emergence of Natural Gas
• 2 The Economics of Natural Gas Development
• 3 Natural Gas and the Environment
• 4 Natural Gas and Development: The Policy Issues for Developing Countries
• 5 Power Generation with Natural Gas-Fired Gas Turbines
• 6 The Use of Natural Gas in the Nitrogen Fertilizer Industry
• 7 Natural Gas and Natural Gas Liquids in the Chemical Industry
• 8 Natural Gas as a Transportation Fuel
• 9 Natural Gas - Interchangeability with Other Fuels
• Appendixes
• About the Contributors
• Index